OPEN LETTER
TO THE PRESIDENT OF UKRAINE VOLODYMYR ZELENSKY
AND THE PRIME MINISTER OF UKRAINE DENIS SHMYHAL
from the Association “Ukrainian Union of Lessors”
and the “Ukrainian League of Industrialists and Entrepreneurs”
Regarding the pressure on business instruments by
fiscal policy of the
Ministry of Finance of Ukraine
and the State Tax Service
(reporting on form 20-OPP)
Dear Mr. President!
Dear Mr. Prime Minister!
The Association “Ukrainian Union of Lessors” , which represents the leasing industry of Ukraine, and the NGO “Ukrainian League of Industrialists and Entrepreneurs” , which represent the interests of domestic producers, express their respect to you and address the following. We ask your attention to the dangerous fiscal innovations and practices of their application, which have recently appeared in all domestic markets, hindering business and increasing social tensions in society.
Ukrainian business, which has shown great responsibility in the difficult times of the pandemic and the global economic downturn, today, unfortunately, is being oppressed by government agencies through these innovations. Making a titanic effort to save jobs in a recession, to preserve economic ties and the volume of goods and services, he is forced to divert huge resources to the administration of uninformative reporting of tax-free property, which is required to introduce in addition to existing and so burdensome array reporting.
Thus, the pressure of fiscal authorities is due to their application of the provisions of the Tax Code of Ukraine (p.63.3 TCU) and the Procedure for accounting of taxpayers and fees, approved by the order of the Ministry of Finance of Ukraine from 09.12.2011 №1588 (hereinafter – the Procedure) Form 20-OPP on any property acquired by leasing companies for further transfer of business, as well as on the property of industrialists and entrepreneurs used in the course of production and other activities.
The norms were strengthened by the Order of the Ministry of Finance dated 24.06.2020 № 323 “On approval of Amendments to the Procedure for registration of taxpayers and fees”, practically forces business to start total, duplicate reporting of “objects related to taxation or through which activities are carried out”. And also with the risk of imposing penalties for previous years of “non-declaration”.
In addition to the unjustified increase in the burden on business, the critical situation is that the current legislation does not contain a definition that defines “objects that are related to the object of taxation”, which means that the norm is an evaluative, corrupt, and impossible to perform in full. After all, any item used in business processes can be attributed to such a group.
The Tax Code of Ukraine in relation to this concept states only the following: “ Objects of taxation and objects related to taxation are property and actions in connection with which the taxpayer has obligations to pay taxes and fees. Such objects for each type of tax and fee shall be determined in accordance with the relevant section of this Code. ”
But it seems obvious that such a duty in business can and should arise only in relation to objects that fall under the list of taxable . And this list is exhaustively defined by Section XII of the TCU “Property Tax”. Extensive interpretation of this normative construction about related objects (namely, this is now happening in the bylaws of the IFI) will lead to a huge shaft of unnecessary reporting, and unrealistic demand for 100% coverage of the expanded list of objects – to the same huge penalties . Which, perhaps, is the ultimate goal of innovation.
In addition, the said Procedure stipulates that the notification of the objects of taxation must be submitted by both the owner of the object of taxation and its recipient, which means that duplication of information is laid down in the norm itself. This, in turn, does not improve tax control, but, in our opinion, makes it impossible, and leads to excessive administrative burden on both the taxpayer and the supervisory authority.
It should be noted that the information that needs to be disclosed in the notification on Form 20-OPP is mostly duplicate, as it is contained in other forms of tax reporting and other documents submitted to the State Tax Service: in particular, in VAT and income tax returns for land (land tax and / or rent for land plots of state or communal property), in the Tax return of the single tax payer of the fourth group and appendix 1 “Information on the availability of land plots” to it, in applications for registration of excise warehouses, applications for fuel storage licenses.
In addition, paragraph 8.5 of the Procedure provides that in case of change of information about the object of taxation, namely: “ change of type, name, location , type of right or condition of the object of taxation, the taxpayer submits to the controlling authority at the main place of registration according to the form 20-OPP with updated information about the object of taxation in respect of which changes have taken place”. However, there is no clear definition or opinion that will be considered a change in the state of the subject, and there is a wide space for evaluative judgments and fantasies. And if we take into account the specifics of, for example, leasing business, where leasing items are used exclusively by the client in its business, the leasing company in principle can not quickly have information about the condition or location of the item (freight can move daily in Ukraine and abroad, etc. ).
Other issues related to the submission of a 20-OPP notification also need to be resolved. It is known that the tax authorities require taxpayers to provide information, for example, on such objects as company cars, which are used by the taxpayer in economic activities and are not subject to the object of property tax. This position of the supervisory authorities has been repeatedly reflected in official letters and consultations. The main argument of the tax authorities is that such an object is contained in the Directory of types of taxable objects, which is published on the official website of the Central Control Authority and which is defined by the Procedure as recommended.
The object type directory contains, for example, lines such as “Kitchen”, “Barrel”, “Table”, which probably means that taxpayers must notify regulatory authorities about such objects as furniture, computer equipment, etc.? And where then will be the limit of such an interpretation, that is, the limit of the absurd? In essence, these objects are no different from, for example, the same company car. All of them, like the car, are not subject to property tax; are fixed assets of depreciable payers; used in the economic activities of taxpayers and reflected in the relevant reporting of taxpayers.
Thus, it can be concluded that, contrary to the interests of business and civil society, government agencies continue to create mechanisms for harassment and discrimination against law-abiding entrepreneurs. In the absence of any explanation as to the purpose of such innovations, it must be assumed that the aim is again to fill the budget. After all, as can be seen from the above, to meet the requirements, given their uncertainty – is problematic or impossible, so the filling will be guaranteed… At the same time, creating a flow of “papers for papers” will lead to another shift in Ukraine Business in an even more unattractive position.
While it would be much more appropriate to pursue a policy of support and promotion of national business, especially in a pandemic. Which, in turn, would create the preconditions for filling the state budget due to the development and prosperity of entrepreneurship, and not through its bleeding.
We strongly urge you to immediately resolve the critical situation for business, and one of the options for settlement we see changes in the current regulatory framework. In particular, by urgent amendments to the Order of the Ministry of Finance dated 09.12.2011 № 1588 ( Annex 1 ), and in the future – to the Tax Code of Ukraine ( Annex 2 ).
Thank you in advance for your attention to the issues raised.
General Director of the ASSOCIATION “UKRAINIAN UNION OF LESSORS”
Maryna Masich
President of the UKRAINIAN LEAGUE OF INDUSTRIALISTS AND ENTREPRENEURS
Anatoliy Kinakh